What You Need to Know
- Respondents answered just 37% of questions about financial risk and uncertainty correctly, on average.
- The survey found one in three respondents couldn’t cope with an unexpected $2,000 expense within a month’s time.
- Financial challenges and lack of financial literacy are much more prevalent in the Black and Hispanic communities.
Lack of Basic Financial Knowhow Hurting Americans: TIAAOne in five U.S. adults say they can’t pay their bills in full and on time in a typical month, and one in three wouldn’t be able to cope with an unexpected $2,000 expense within a month’s time.
These were among the findings of the fifth annual Personal Finance Index, released Monday by the TIAA Institute and the Global Financial Literacy Excellence Center at the George Washington University School of Business.
This year’s P-Fin Index was based on a survey completed online in January by a sample of 3,035 U.S. adults.
The results indicate that many American adults are challenged to make appropriate financial decisions because of poor financial literacy. Survey respondents answered only half of P-Fin Index questions correctly, on average, down two percentage points from the previous survey.
Twenty percent correctly answered only one-quarter or less of the index questions.
Financial literacy is lowest in the area of comprehending risk and uncertainty — a particularly serious problem in the current economic environment. Respondents answered just 37% of questions on the topic correctly, on average.
“This year’s Personal Finance Index reveals the precarious financial situations of many Americans, which have been exacerbated by the COVID-19 pandemic,” TIAA Institute senior economist Paul Yakoboski said in a statement.
“But we have also seen Americans become increasingly motivated since the onset of COVID to improve their personal finances. Now is the time to focus on enhancing financial literacy as we look forward to life post-COVID.”